21/02/2020 07:00 |
Inside Information / Information on annual revenues |
INFORMATION REGLEMENTEE
Press release
Satisfactory full-year results in 2019 Strong growth and improvement in performance Consolidated revenue growth of 8.3% to €4,434.0 million 1 Organic revenue growth of 6.5% Increase of 15.1% in operating profit on business activity to €354.3 million, a margin of 8.0% (7.5% in 2018) Net profit attributable to the Group up 28.1% to €160.3 million Free cash flow of €229.3 million (€173.1 million in 2018), representing a cash conversion 2 rate with respect to operating profit on business activity of 51% (50% in 2018) 3 Sopra Steria named on CDP’s A List for the 3rd consecutive year Paris, 21 February 2020 – At its meeting on 20 February 2020 chaired by Pierre Pasquier, Sopra Steria’s Board of Directors conducted an in-depth review of the consolidated financial statements 4 for the financial year ended 31 December 2019. Sopra Steria: 2019 Full-year results 2019 2018 Amount Change Rate Amount Rate Key income statement items Rev enue €m 4,434.0 +8.3% 4,095.3 + 6.5% Organic growt h Oper at i ng profit on business activ i t y €m/% 354.3 +15.1% 8.0% 307.9 7.5% Pr ofi t from recurring operations €m/% 314.2 +20.5% 7.1% 260.8 6.4% Oper at i ng profit €m/% 283.2 +25.0% 6.4% 226.6 5.5% Net profit attributable to the Group €m/% 160.3 +28.1% 3.6% 125.1 3.1% W ei ght ed av er age number of shares in issue excl. m 20.23 +0.3% 20.18 treasury shares Basic earnings per share € 7.92 +27.7% 6.20 Recurring earnings per share € 8.97 +20.7% 7.43 Key balance sheet items 31/12/2019 31/12/2018 Net financial debt €m 513.9 620.9 Equity attributable to the Group €m 1,372.7 1,296.2 * Alternative performance measures are defined in the glossary at the end of this document 1 Alternative performance measures are defined at the end of this document. 2 Restated for non-recurring and exceptional items. 3 Every year, thousands of companies and organisations around the world provide details on their environmental performance to CDP for independent assessment against its scoring methodology for the benefit of investors, purchasers and other stakeholders. 4 Audit procedures have been carried out on the financial statements. The Statutory Auditors’ report is in the process of being issued. General comments on financial year 2019 The financial year saw significant performance improvements and the Group hit all of its targets. Strong organic revenue growth in the year confirmed Sopra Steria’s ability to seize opportunities in a market driven by the challenges of digital transformation and further reinforced its excellent positioning, built on its offerings and its distinctive approach. Two strategic acquisitions in the retail banking space have strengthened the Group’s development. Sopra Banking Software’s acquisition of SAB and Sopra Steria’s acquisition of Sopra Financial Technology (a joint venture with the Sparda banking network) have helped Sopra Banking Software reach critical mass in its market (2019 pro forma revenue of €500 million) and are creating new opportunities for the implementation of digital platforms in the banking sector. The operating margin improved thanks to the continuing shift toward higher-value offerings and more effective risk management. The Group’s consulting teams continued to expand their digital services offerings and raised prices. In software solutions, particularly for specialised lending, the results of the plan put in place for 2019, focused on product industrialisation and enhancements in product security, were in line with expectations. Structural improvements made to the client payment cycle continued during the year, resulting in an increase in the cash conversion rate. The Group also strengthened its organisation and its internal governance system to prepare its future growth and reinforce its capacity to deliver on its medium-term strategy. Details on 2019 operating performance Consolidated revenue totalled €4,434.0 million, an increase of 8.3%. Changes in scope had a positive impact of €67.3 million, and currency fluctuations had a positive impact of €1.1 million. Organic revenue growth was 6.5%. The Group’s operating profit on business activity grew 15.1% to €354.3 million (€307.9 million in 2018), a margin of 8.0%, up 0.5 percentage points from the previous year. In France, revenue came to €1,813.1 million (comprising 41% of Group revenue). Organic growth came in at 6.7%, driven by higher volumes and selling prices. This performance was fuelled in particular by the success of the high value strategy and the accentuated verticalisation of the Group’s organisation. It was accompanied by a decrease of 0.7 percentage points in the employee turnover rate for the Consulting and Systems Integration business, to 17%. Defence, aerospace, transport and social (job centres, health insurance, etc.) were the best-performing vertical markets. Accordingly, operating profit on business activity for the reporting unit was up 12.9%, corresponding to an improvement in the operating margin of 0.6 percentage points, to 9.7%. In the United Kingdom, hampered by an unpropitious business environment, particularly in the fourth quarter of 2019, revenue came to €771.5 million (17% of Group revenue). Since 28 June 2019, it no longer includes the recruitment business, which contributed €129.2 million in revenue in 2018. Excluding this impact and fluctuations in the British pound, revenue growth was 7.3%. The operating margin on business activity improved strongly by 1.6 percentage points to 7.3%. In addition to the anti-dilutive effect associated with the disposal of the recruitment business, the overall performance improvement was driven by that of the two joint ventures in the public sector (NHS SBS and SSCL), which together accounted for over 40% of the reporting unit’s revenue. This momentum was further demonstrated, in December 2019, with the award to SSCL by the UK Ministry of Defence of a seven-year, £300 million contract to provide improved administrative, payroll, pension and human resources services for military personnel. Efforts under way to reinforce the model for the rest of the reporting unit’s business activities, particularly in the private sector, need to be continued over several more half-year periods. The Other Europe reporting unit posted organic revenue growth of 7.2% to €1,152.9 million (26% of Group revenue). Business in Germany was stable, in a context of lower spending, especially by certain banks, which affected operating performance for the year. Elsewhere in the reporting unit, growth was particularly brisk in Scandinavia, Italy and Spain, and profitability improved substantially in Belgium. Moreover, since 1 August 2019 2/8 Sopra Financial Technology has been responsible for operating the information system of the Sparda banking network. This business, which involves low margins during the initial transformation phase, generated revenue of €86.3 million in the second half of 2019 and had a dilutive impact of 0.6 points on the operating margin. For the reporting unit as a whole, the operating margin on business activity was 6.7% (8.1% in 2018). Sopra Banking Software recorded organic revenue growth of 2.9% to €438.9 million (10% of Group revenue). In a difficult climate, priority was given to delivering on projects. The year was satisfactory in this respect, with more than 200 successful “go lives” across all product lines. In the area of retail banking, work continued on improvements for all three products, while a plan to optimise synergies was initiated, by way of the digital layer: 31 clients in 17 countries adopted the new digital platform DBEP (formerly known as DxP), in line with the entry 5 into effect of the EU’s revised PSD2 . In the area of specialised lending, the strategic plan’s objectives were met, with the confirmation of the release of version 4.7 of the Cassiopae product, due by the end of the first quarter of 2020, and gradual improvements in difficult client situations. Apak delivered a strong performance, in line with forecasts. For the reporting unit as a whole, the operating profit on business activity was €4.9 million, compared with a loss of €13.3 million in 2018. The Other Solutions reporting unit posted revenue of €257.5 million (6% of Group revenue), representing organic growth of 6.0%. The Group’s human resources solutions recorded organic growth of 3.7%. The Source Solde project was one of the year’s highlights, with the successful implementation of a payroll system for the 39,000 military personnel of France’s Marine Nationale (the French navy). Property management solutions recorded growth at the high rate of 10.8%, buoyed by the maturity of the new data-driven technologies. The operating margin on business activity for the reporting unit was 15.7% (16.7% in 2018). Investments will be increased in 2020 to step up the digitisation of property management solutions and prepare more rapid expansion for this line. Comments on the components of net profit attributable to the Group in 2019 Profit from recurring operations totalled €314.2 million. That figure reflects a substantial decrease in the share- based payment expense (€11.1 million, versus €22.8 million in 2018). Operating profit was €283.2 million after a net expense of €31.0 million for other operating income and expenses (compared with a net expense of €34.2 million in 2018). The tax expense for the year totalled €87.3 million, an effective tax rate of 33.8%. The share of profit from equity-accounted companies (Axway) was €1.8 million (€3.6 million in 2018). After deducting €12.7 million in minority interests, net profit attributable to the Group rose 28.1% to €160.3 million (€125.1 million in 2018). Basic earnings per share rose 27.8% to €7.92, compared with €6.20 in 2018. Financial position at 31 December 2019 Sopra Steria ended the year in 2019 with a robust financial position. 6 Free cash flow came to €229.3 million (€173.1 million in 2018), which corresponds to a cash conversion rate with respect to operating profit on business activity of 51% (50% in 2018), continuing the upward trend seen since 2015. This performance reflected in particular a 6-day reduction in the average payment period of trade receivables. Net financial debt totalled €513.9 million, down 17% from its level at 31 December 2018. It was 1.26x pro forma EBITDA for 2019 before the impact of IFRS 16 (with the bank covenant stipulating a maximum of 3x). Proposed dividend in respect of financial year 2019 At the next General Meeting of Shareholders, Sopra Steria will propose the payment of a dividend 7 of €2.40 per share (€1.85 per share in respect of financial year 2018). 5 Payment Services Directive 2. 6 Restated for non-recurring and exceptional items. 7 General Meeting to be held on Tuesday, 9 June 2020. The ex-dividend date will be 1 July 2020. The dividend will be payable as from 3 July 2020. 3/8 Workforce At 31 December 2019, the Group’s workforce totalled 46,245 people (44,114 at 31 December 2018), with 19.6% working in X-Shore zones. Social and environmental footprint Sopra Steria firmly believes that digital technology, when closely linked to humanity, is a rich source of opportunity and progress. The Group sees its contribution to society as sustainable, human and guiding. As one measure of its deep commitment to this role, Sopra Steria is proud to have been a signatory of the United Nations Global Compact since 2004. In January 2020, CDP announced that Sopra Steria had been named on its global climate change A List for the third consecutive year. The Group is thus ranked alongside 179 other companies leading the way in corporate transparency and action on climate change. In particular, this ranking is based on targets set by companies to reduce greenhouse gas emissions, approved by the Science Based Targets initiative (SBTi), in line with the aim to limit the global average temperature rise to 1.5°C. Furthermore, the actions carried out in 2019 to raise Sopra Steria’s profile as a leading employer helped increase the net headcount by 2,131 employees over the year, accompanied by a 0.7 percentage point drop in the employee turnover rate in France to 17% and the continuation of efforts to bring more women into the Group, with the proportion of female employees rising from 31.6% at end-2018 to 32.0% at end-2019 (excluding the impact of the year’s acquisitions). Medium-term ambition Sopra Steria’s strategy is organised around its independent corporate plan for sustainable value creation, which is based on expansion, added value and differentiation, particularly through its software business as well as specific contributions to meet the European challenges of digital sovereignty. Accordingly, and in full consideration of current market conditions, the Group aims to achieve gradual and continuous improvements in its performance. Over the medium term, in a market driven by digital transformation, the Group is targeting annual organic revenue growth of between 4% and 6%, an operating margin on business activity of around 10%, and free cash flow of between 5% and 7% of revenue. Targets for 2020 Organic revenue growth of between 3% and 5% Slight improvement in operating margin on business activity Free cash flow in excess of €180 million 2019 annual results presentation meeting The annual results for 2019 will be presented to analysts and investors in French on 21 February 2020 at 9:00 a.m. CET, at the Shangri-La Hotel in Paris. The presentation may be attended remotely via a bilingual webcast in French and English: - Register for the French-language webcast: https://edge.media-server.com/mmc/p/52vvgvxs - Register for the English-language webcast: https://edge.media-server.com/mmc/p/52vvgvxs/lan/en Or by phone: - French-language phone number: +33 (0)1 70 71 01 59 – PIN: 83610243# - English-language access number: +44 207 194 37 59 – PIN: 37405702# Practical information about the presentation and webcast can be found in the ‘Investors’ section of the Group’s website: https://www.soprasteria.com Next financial release Friday, 24 April 2020 (before market open): Q1 2020 revenue. 4/8 Glossary Restated revenue: Revenue for the prior year, expressed on the basis of the scope and exchange rates for the current year. Organic revenue growth: Increase in revenue between the period under review and restated revenue for the same period in the prior financial year. EBITDA: This measure, as defined in the Registration Document, is equal to consolidated operating profit on business activity after adding back depreciation, amortisation and provisions included in operating profit on business activity. Operating profit on business activity: This measure, as defined in the Registration Document, is equal to profit from recurring operations adjusted to exclude the share-based payment expense for stock options and free shares and charges to amortisation of allocated intangible assets. Profit from recurring operations: This measure is equal to operating profit before other operating income and expenses, which includes any particularly significant items of operating income and expense that are unusual, abnormal, infrequent or not foreseeable, presented separately in order to give a clearer picture of performance based on ordinary activities. Basic recurring earnings per share: This measure is equal to basic earnings per share before other operating income and expenses net of tax. Free cash flow: Free cash flow is defined as the net cash from operating activities; less investments (net of disposals) in property, plant and equipment, and intangible assets; less lease payments; less net interest paid; and less additional contributions to address any deficits in defined-benefit pension plans. Disclaimer This document contains forward-looking information subject to certain risks and uncertainties that may affect the Group’s future growth and financial results. Readers are reminded that licence agreements, which often represent investments for clients, are signed in greater numbers in the second half of the year, with varying impacts on end-of-year performance. Actual outcomes and results may differ from those described in this document due to operational risks and uncertainties. More detailed information on the potential risks that may affect the Group’s financial results can be found in the 2018 Registration Document filed with the Autorité des Marchés Financiers (AMF) on 12 April 2019 (see pages 28 to 44 and 229 to 233 in particular). Sopra Steria does not undertake any obligation to update the forward-looking information contained in this document beyond what is required by current laws and regulations. The distribution of this document in certain countries may be subject to the laws and regulations in force. Persons physically present in countries where this document is released, published or distributed should enquire as to any applicable restrictions and should comply with those restrictions. About Sopra Steria Sopra Steria, a European leader in consulting, digital services and software development, helps its clients drive their digital transformation and obtain tangible and sustainable benefits. It provides end-to-end solutions to make large companies and organisations more competitive by combining in-depth knowledge of a wide range of business sectors and innovative technologies with a fully collaborative approach. Sopra Steria places people at the heart of everything it does and is committed to making the most of digital technology to build a positive future for its clients. With 45,000 employees in 25 countries, the Group generated revenue of €4.1 billion in 2018. The world is how we shape it. Sopra Steria (SOP) is listed on Euronext Paris (Compartment A) – ISIN: FR0000050809 For more information, visit us at www.soprasteria.com Contacts Investor Relations Press Relations Olivier Psaume Caroline Simon (Image 7) caroline.simon@image7.fr olivier.psaume@soprasteria.com +33 (0)1 40 67 68 16 +33 (0)1 53 70 74 65 5/8 Annexes Sopra Steria: Impact on revenue of changes in scope and exchange rates – FY 2019 2019 2018 Grow th €m Revenue 4,434.0 4,095.3 +8.3% Changes in exchange rates 1.1 Revenue at constant exchange rates 4,434.0 4,096.4 +8.2% Changes in scope 67.3 Revenue at constant scope and exchange rates 4,434.0 4,163.7 +6.5% Sopra Steria: Changes in exchange rates – FY 2019 A v e r age A v e r age For €1 / % Change rate 2019 rate 2018 Pound sterling 0.8778 0.8847 +0.8% Nor wegi an krone 9.8511 9.5975 -2.6% S wedi sh krona 10.5891 10.2583 -3.1% Dani sh krone 7.4661 7.4532 -0.2% S wi ss franc 1.1124 1.1550 +3.8% Sopra Steria: Revenue by reporting unit (€m / %) – FY 2019 2018 T otal Organic 2019 2018 growth growth Rest at ed* 1,813.1 1,699.6 1,699.5 + 6.7% + 6.7% France 771.5 719.0 783.1 + 7.3% -1.5% United Kingdom 1,152.9 1,075.4 997.1 + 7.2% + 15.6% Other Europe 438.9 426.8 373.7 + 2.9% + 17.5% Sopra Banking Software 257.5 243.0 241.8 + 6.0% + 6.5% Other Solutions Sopra Steria Group 4,434.0 4,163.7 4,095.3 +6.5% +8.3% * Revenue at 2019 scope and exchange rates Sopra Steria: Revenue by reporting unit (€m / %) – Q4 2019 Q4 2018 T otal Organic Q4 2019 Q4 2018 growth growth Rest at ed* 470.5 458.1 458.1 + 2.7% + 2.7% France 175.7 178.1 209.1 -1.4% -16.0% United Kingdom 336.0 311.8 279.7 + 7.8% + 20.1% Other Europe 130.4 131.5 113.8 -0.8% + 14.6% Sopra Banking Software 75.3 70.1 69.2 + 7.4% + 8.9% Other Solutions Sopra Steria Group 1,187.9 1,149.6 1,129.9 +3.3% +5.1% * Revenue at 2019 scope and exchange rates 6/8 Sopra Steria: Performance by reporting unit – FY 2019 2019 2018 €m % €m % France 1,813.1 1,699.5 Rev enue 175.5 9.7% 155.4 9.1% Operating profit on business activ i t y 167.2 9.2% 139.2 8.2% Pr ofi t from recurring operations 156.9 8.7% 131.8 7.8% Oper at i ng profit United Kingdom 771.5 783.1 Rev enue 56.1 7.3% 45.0 5.7% Operating profit on business activ i t y 43.8 5.7% 32.6 4.2% Pr ofi t from recurring operations 42.3 5.5% 18.7 2.4% Oper at i ng profit Other Europe 1,152.9 997.1 Rev enue 77.4 6.7% 80.4 8.1% Operating profit on business activ i t y 73.0 6.3% 74.9 7.5% Pr ofi t from recurring operations 66.1 5.7% 68.5 6.9% Oper at i ng profit Sopra Banking Software 438.9 373.7 Rev enue 4.9 1.1% -13.3 -3.6% Operating profit on business activ i t y -8.9 -2.0% -24.2 -6.5% Pr ofi t from recurring operations -18.0 -4.1% -28.9 -7.7% Oper at i ng profit Other Solutions 257.5 241.8 Rev enue 40.3 15.7% 40.4 16.7% Operating profit on business activ i t y 39.1 15.2% 38.4 15.9% Pr ofi t from recurring operations 35.9 14.0% 36.5 15.1% Oper at i ng profit Sopra Steria: Consolidated income statement – FY 2019 2019 2018 €m % €m % Revenue 4,434.0 4,095.3 Staff costs -2,668.5 -2,441.5 Operating expenses -1,253.3 -1,290.7 Depreciation, amortisation and prov i si ons -157.9 -55.2 Operating profit on business activity 354.3 8.0% 307.9 7.5% S har e-based payment expenses -11.1 -22.8 Amortisation of allocated intangible assets -28.9 -24.3 Profit from recurring operations 314.2 7.1% 260.8 6.4% Ot her operating income and expenses -31.0 -34.2 Operating profit 283.2 6.4% 226.6 5.5% Cost of net financial debt -9.9 -7.8 Other financial income and expenses -14.7 -11.7 Tax expense -87.3 -82.0 Share of net profit from equity-accounted companies 1.8 3.6 Net profit 173.1 3.9% 128.7 3.1% 160.3 125.1 At t r i but abl e to the Group 3.6% 3.1% 12.7 3.6 Non-cont r ol l i ng interests W ei ght ed av er age number of shares in issue excl. treasury shares (m) 20.23 20.18 Basic earnings per share (€) 7.92 6.20 7/8 Sopra Steria: Change in net financial debt (€m) – FY 2019 2019 2018 IFRS 16 excl. IFRS 16 Operating profit on business activity 354.3 307.9 Depreciation, amortisation and prov i si ons (excl. allocated intangible assets) 159.3 55.8 EBITDA 513.6 363.7 -3.0 -8.1 Non-cash items -81.0 -63.4 Tax paid 25.3 -23.1 Change in operating working capital requirement -32.7 -39.2 Reorganisation and restructuring costs Net cash flow from operating activities 422.2 229.8 Lease payments -109.8 - -49.7 -61.8 Change relating to inv est i ng activ i t i es Net interest -9.3 -8.4 -24.1 -23.4 Additional contributions related to defined-benefit pension plans Free cash flow* 229.3 136.1 -89.5 -168.8 Impact of changes in scope -2.6 -4.7 Financial inv est ment s -39.9 -48.7 Div i dends paid 2.9 1.4 Div i dends receiv ed from equity-accounted companies 0.0 0.0 Capital increases in cash -2.8 -23.4 Purchase and sale of treasury shares -7.3 -2.6 Impact of changes in foreign exchange rates 16.9 - Impact of the initial application of IFRS16 Change in net financial debt 107.0 -110.8 229.3 173.1 * Free cash flow after restating for the sale of trade receivables in 2017 for €37 million Net financial debt at beginning of period 620.9 510.1 Net financial debt at end of period 513.9 620.9 Sopra Steria: Simplified balance sheet (€m) – 31/12/2019 31/ 12/ 2019 31/ 12/ 2018 IFRS 16 excl. IFRS 16 1,813.9 1,708.5 Goodwi l l 181.5 183.0 Allocated intangible assets 267.9 234.9 Other fixed assets Right-of-use assets 320.4 - 195.0 195.1 Equi t y-account ed inv est ment s Fixed assets 2,778.8 2,321.5 Net deferred tax 98.1 79.6 1,074.3 1,091.8 Trade accounts receiv abl e (net) -1,256.1 -1,153.1 Other assets and liabilities Working capital requirement (WCR) -181.8 -61.3 Assets + WCR 2,695.1 2,339.8 1,422.2 1,329.2 Equity 339.7 308.3 Prov i si ons for post-employment benefits 77.0 81.5 Prov i si ons for contingencies and losses Lease liabilities 342.1 - 513.9 620.9 Net financial debt Capital invested 2,695.1 2,339.8 Sopra Steria: Workforce breakdown – 31/12/2019 31/ 12/ 2019 31/ 12/ 2018 19,502 19,013 Fr ance 6,305 6,407 United Kingdom 10,868 10,095 Other Europe 510 344 Rest of the W or l d 9,060 8,255 X-Shore Total 46,245 44,114 8/8 |